Indian Oil Corporation (IOC) is raising Rs 22,000 crore through its maiden rights issue as part of the Centre’s plan to infuse capital into three state-owned fuel retailers to fund their net zero carbon emission projects.
The government, which holds 51.50 per cent of the PSU refiner, will subscribe to the offer. The shares of the PSU breached the Rs 100 mark in intra-day trades on Friday. It hit a 52-week high of Rs 101.20 on the BSE and settled at Rs 99.25 a gain of 0.66 per cent over the last close.
Last month, the board of BPCL approved raising to Rs 18,000 crore through a rights issue. HPCL is also set to announce a fund-raising plan, likely a preferential allotment to the central government.
The government in the annual budget for 2023-24 announced Rs 30,000 crore of capital support to state-run fuel retailers — BPCL, IOC and Hindustan Petroleum Corporation Ltd (HPCL) — to support their energy transition and net zero initiatives.
IOC has not specified which projects the newly raised funds would target. It said it would give further details on the rights issue, including the price and timing, after board approval. The three refiners together aim to invest Rs 3.5-4 lakh crore to achieve their net zero-emission goals by 2040. IOC had last month doubled its authorised share capital to Rs 30,000 crore.
Indian Oil also approved the formation of a joint venture for battery-swapping business in India as a private limited company with a 50:50 collaboration between itself and Sun Mobility Pte Ltd Singapore, with IOC’s equity investment of Rs 1,800 crore ($217.83 million).
“The Board has also accorded approval for an investment of $78.31 million in IOCL Singapore Pte Ltd, Singapore (a wholly owned subsidiary of IndianOil) for the acquisition of preference shares and warrants of SMS,” it said. “These investments are subject to receipt of necessary statutory/ regulatory approvals.”
Fitch Ratings said in a recent report that plans by BPCL and IOC to raise equity capital should strengthen their capex spending and thecredibility of their emission-reduction plans. The rating agency added that an injection of capital from the Indian government would provide further evidence for its assumption that the two companies would receive extraordinary sovereign support if needed. The companies have a BBB- rating with a stable outlook.
According to the rating agency, all three OMCs had last year announced targets to reduce Scope 1 and 2 emissions (those directly emitted by the firm itself and those indirectly stemming from its energy or cooling purchases) to zero.
“We believe the OMCs have the execution capabilities to carry out these plans, but such long-term targets inevitably remain subject to risks, including energy demand-supply mismatches, slow or insufficient technological or policy progress, and lack of infrastructure,’’ it noted.
